In the past few weeks, several clients have asked, “Will prices ever come down?”
Short answer—yes and no.
Read on to understand the current pricing situation and gain useful saving tips.
Please share any tips you have for reducing household and lifestyle expenses. We’d love to hear about them. Big or small, all ideas are welcome!
Grocery prices continue upward. Time to get creative!
Today, we talk about:
-Increasing construction and grocery costs.
-Offer key grocery saving tips to combat what seems like non-stop price increases.
-How our investment management approach helps offset economic challenges.
Pricing Overview
Current pricing levels on goods and services are mixed.
For example, prices are down for gas, used cars, airline tickets, furniture and major appliances. However, construction and food prices continue to be up.
Why?
Construction Prices
Construction price increases are largely due to geopolitical turmoil, inflation, regulatory change; and resource and labor shortages, according to a Currie & Brown report.
Also, “Material prices have started to dip slightly as supply chains focus on recovery, but costs remain high compared to pre-pandemic levels,” according to home builder Schar Construction. “Demand for construction will probably keep those costs elevated throughout 2024 and 2025…By 2024, prices could be 25% to 28% higher than they would’ve been compared to pre-2020.”
More than one in five construction workers is aged 55 and up. As these workers retire, the labor pool is expected to shrink even more, according to the CBRE Construction Cost Index. Ultimately, adding to price increases.
Related: See last month’s client letter for a look at the current housing market.
Grocery Prices (up, up and away)
It’s true, you’re spending more money at the grocery store and coming home with less food. In general, food prices are roughly 30% higher than four years ago.1
On a positive note, food price growth has slowed.
So, what’s going on!?
Candidly, food manufacturers are taking profits.
Keep in mind, most grocery categories are dominated by just a handful of companies that own hordes of brands.
For Example:
PepsiCo—owns 23 brands, including Aquafina, Doritos, Fritos, Gatorade, Lay’s, Pepsi and Quaker Oats.
Nestle—owns 2000 brands (not a typo), including Carnation, Cheerios, Lean Cuisine, Starbucks and Stouffer’s.
Kraft Heinz—owns 200 brands, including Maxwell House, Nabisco, Oreo, Oscar Mayer, Philadelphia and Trident.
Here’s just one example of dominating a food category, and increasing food prices without consumers receiving more value:
According to a recent Forbes article, Kraft Heinz dominates the packaged cheese category at 65% market share. Category unit volumes are up just 6%, while prices are up 21%. That’s exactly the intention. “We are not going to be chasing volume,” according to the Kraft Heinz CEO, “We’re going to be looking to drive profitable volume.”
To understand what other companies are dominating the grocery store shelves, read the full Forbes article, Why Your Groceries Are Still So Expensive1.
Related: See our past client letter, Grocery Prices Truths.
Free Up Cash: Try These Creative Grocery Shopping Saving Tips
To save on your grocery bill, do the following:
Beware of end cap “sales”. Just because items are displayed on end caps, doesn’t necessarily mean they’re on sale. Companies pay premium fees to secure these spots, however, if you go further down the aisle, you may find there’s another soup or chip brand priced—even lower. Often, the items on end caps are made to look like they’re on sale, when they’re not.
Buy generic store brands. However, pay close attention to the unit price (the cost of an item by its size) versus the retail price when comparing two similar products. Only then, will you know which product is cheaper.
Note: If you’re purchasing items in bulk at stores like Costco, remember to compare the unit price to what you’d pay at Market Basket or similar stores. Bulk purchases aren’t always the most cost-effective option.
Eat before you shop. When you have a full stomach, you’ll be more likely to resist temptations.
Look up and down. When shopping the middle aisles, stick to items on the top and bottom shelves, they’re typically cheaper. The packaging doesn’t always look as attractive, which is why it’s likely cheaper. When in doubt, compare unit prices.
Plan ahead by making a shopping list. Organize your meals, check your fridge and pantry for ingredients, review sales flyers and use coupons. Stick to your list and only purchase non-listed items if they are staple items on sale.
Swap ingredients. According to Oxford University research, adopting a vegan, vegetarian or flexitarian diet could slash your food bill by up to one-third!
Try shopping at Aldi’s. It’s currently #1 out of the seven cheapest grocery stores in the U.S., according to U.S. News & World Report. Market Basket and Costco are ranked five and seven respectfully. Aldi’s has 21 locations in Massachusetts and nine in New Hampshire.
Free Up Even More Cash
Try These Additional Saving Tips…
Maximize recurring bills, e.g., cable/internet, gym membership, insurance, mobile phone, streaming services, etc.
Are you using everything you’re paying for? If not, cancel or reduce your services. Remember, you can always re-up if you don’t like the change.
Reduce taxes by planning ahead. We’re in the throes of the 2023 tax season deadlines, an ideal time to speak with your accountant and us about ways to reduce your taxes for tax year 2024.
Use a cash back credit card. Fidelity (our long-time financial custodian partner) offers a credit card with up to 2% cash back on everyday spending. This is cash that can go back into your Fidelity account every month.
Also, some clients have their cash back automatically deposited into their kids’ 529 plans or IRA accounts.
Your Investment Portfolio & Offsetting Economic Challenges
Amid rising prices, we’re here to help ensure your financial portfolio is positioned to grow and counter inflation.
How?
We believe equities are the long-term growth engine of a portfolio that helps mitigate the longevity risk that most people face. This said, we use both passive and active strategies to get specific sector exposure, control taxes and manage fund expenses (aiming for an expense ratio below the average of its peer group).
Also, we strive to be as tax efficient as possible to increase long-term returns and reduce clients’ taxes, and are committed to keeping our advisory fees competitive, about 22% below industry average.
With discipline and patience, the market has proven time and time again, that long-term compounding is the key driver of building wealth.
Our primary role is proactively managing this process for you, so you can be off living your life to its fullest.
Read our one-page Statement of Core Investment Beliefs.
Before You Go
Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.
Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.